Mumbai: Threatened by the possibility of alternative financial centres emerging in states such as Gujarat—the immediate threat is the Gujarat International Finance Tec-City (GIFT)—the Maharashtra government is mapping out a plan to create a new financial district on the outskirts of Mumbai.

The new International Business and Finance Centre is seen as the next Bandra-Kurla Complex of Mumbai, and is being planned along the Thane-Belapur road, where a large number of defunct industrial units are currently based. The idea is to use that land to create a new hub to attract financial and technology firms.

The plan is part of the state’s new housing policy, a draft of which has been circulated among legislators. Mint has reviewed a copy of the draft policy.

“Mumbai’s competitive advantage of being the financial capital of India is under challenge from many cities. It is therefore necessary that all steps be taken to maintain Mumbai’s competitive advantage as the financial capital of India by looking and planning ahead," the document says.

GIFT, near Ahmedabad, will house the country’s first international financial services centre, an enclave modelled on Hong Kong, with rules similar to those of offshore financial centres.

The GIFT project has been criticized by political parties in Maharashtra—including Bharatiya Janata Party (BJP) ally Shiv Sena—that say such cities will reduce the importance of Mumbai as the financial capital of the country.

In response, Maharashtra chief minister Devendra Fadnavis, of the ruling BJP, has said his government will consider an international financial services centre in Mumbai.

It isn’t clear whether the proposed new development will be pitched as an international financial services centre.

What is clear is its necessity.

The Bandra-Kurla complex was built on marshy lands along the Mithi river in the early 1990s and firms, starting with ICICI Bank Ltd, starting moving in from 1999. It created an alternative to the then financial hub of the city, Nariman Point. Now there is hardly any space in the area and only 35 of its 370 hectares are undeveloped.

Explaining the choice of the Thane-Belapur road, the draft policy says that manufacturing activity in the Mumbai Metropolitan Region is no longer competitive when compared with other parts of the state.

The area, spread across 27 sq.km., was developed in the 1960s and 1970s to move polluting industries out of Mumbai. The industrial estate was at its peak in the 1980s, when it had more than 3,000 units and housed 100,000 workers.

A senior state government official, who did not wanted to be named, said that the area has all the advantages the Bandra-Kurla complex did.

“A major part of the Bandra-Kurla complex’s attraction was connectivity. The Thane-Belapur area offers similar advantages. With work on the Navi Mumbai Airport going ahead, air connectivity is not going to be an issue for senior executives of big national and international firms."

The area is also on the suburban railway network, he added.

As a way to attract firms, the state will permit the conversion of the industrial zone into commercial and residential zones and put in place integrated development regulations similar to those applicable to Bandra-Kurla complex within six months of the draft housing policy being finalized. Operating industrial units will also be encouraged to shift to other parts of the state over period of next five years.

Existing lease holders will be allowed to use 50% of land for construction of affordable houses and the rest can be used for commercial activity, said the draft, adding that additional floor space index (FSI) of three, compared with the standard FSI of one, will be permitted. FSI dictates the amount of construction allowed on any plot of land.

Some analysts are sceptical about parts of the plan.

“The state government may able to attract IT (information technology) and IT-enabled services companies as the work force for these companies largely lives in Navi Mumbai and Thane but I am not so sure about it attracting many financial services companies," said Anuj Puri, chairman of property consultancy JLL India.

An earlier plan to develop Wadala and adjoining eastern suburbs as the new financial district is a more workable proposition, Puri added.

Ashish Vaidya, executive director and head of trading, treasury and markets, at DBS Bank Ltd, who has been a banker in the city for more than two decades, says that the success of an alternative financial district would depend on how well the infrastructure around it is planned.

“In that sense the Bandra-Kurla complex’s development was also due to chance. True, there was land available and infrastructure like roads were made but it also coincided with the rising rentals in Nariman Point," Vaidya said.

“To build an international finance centre the government should look beyond just tax incentives, because these incentives are just short-term. We need infrastructure more than anything else, which means better roads, electricity, and proper transport facilities."